Motherson Sumi Wiring India Limited (MSUMI.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '26 Results Conference Call, hosted by Motherson Sumi Wiring India Limited. [Operator Instructions] I now hand the conference over to Mr. V.C. Shegal from Motherson Sumi Wiring India Limited. Thank you, and over to you, Mr. Sehgal.

Thank you. Good evening, ladies and gentlemen, and thank you for joining us today. I'd like to introduce the people on the call, we have Pankaj Mital. We have Anurag Gahlot. We have Gulshan Pahuja. We have Laksh Vaaman Sehgal and myself on the call. I warmly welcome you to the Motherson Sumi Wiring India results call for the third quarter FY '26. I appreciate your continued interest and confidence in MSWIL. The quarter has been marked by a mixed operating environment, while the Indian automotive industry demonstrated a very healthy growth, we also witnessed sustained upward pressure on commodity prices, particularly copper. Against this backdrop, I am pleased to share that MSWIL has delivered a strong resilient performance reflecting the robustness of our business model and the disciplined execution of our teams. During the quarter 3 financial year '26, MSWIL reported a healthy year-on-year growth in revenues, EBITDA and profitability. And with both reported and ex greenfield operations showing steady progress. Our greenfield investments are strategic and position MSWIL well to support the future growth across ICE, EV and hybrid platforms. The increased contribution from these facilities will further strengthen our scale and competitiveness over the medium to long term. I'm also pleased to highlight that MSWIL will continue to maintain a debt-free status supported by a strong cash flow generation and prudent capital management. Our performance remains on deepening customer relationships, increasing content per car and supporting OEMs as they transition over to powertrain technologies. With that, I now hand it over to Pankaj, Anurag and Gulshan, who will be happy to address any questions that you may have. Thank you and over to you. Operator?

[Operator Instructions] First question is from Gunjan from Bank of America.

My first question is on the copper inflation that has affected the margins in this quarter. Can you just refresh as to what is the overall exposure in terms of copper, how big it is in terms of either RM or net sales? And what is the typical contractual agreement with the customer OEMs in terms of pass-through?

Pankaj and Anurag, either of you can.

So this copper has given a total impact of approximately around 1.9% to 2% at this moment. And we have back-to-back arrangement contract with the customer for these arrangements that it will be by a quarter lag or in some cases, a 6 months lag.

I hope that answers your question, Gujan? Because the money will come before the end of the financial year, but it only affects the time lag.

Got it. Just a follow-up. I mean, you quantified the impact in this quarter, but the commodities continue to go up, right? I mean, copper has continued to go up. So is it fair to say that there is a similar sort of impact, which we can see in quarter 4 as well? And I'm just trying to understand how much of the inflation is already factored in this quarter and how much more to go. A little bit more color on that?

Anurag?

So when the copper price will be an upward trend, there is an impact which is there on the temporal basis, but we have a pass-through arrangement with our customers. So whenever it gets increases, always get compensated. So in terms of inflationary, we don't have a control on the increasing copper prices. But having said so, whenever it is on an increasing trend, our discussions with the customer getting -- progressing at a fast pace also -- that there should be a minimum impact, which needs to be the same. But there are certain customers where we're getting adjusted on a quarterly or a half yearly basis. So lag will remain, but we will -- but the discussions with the customer, how to minimize that so that we can consider the inflationary, which is going right now as per the current market scenario.

Got it. And my second question is on this -- the new plant, the new start-up plants, which you had all these programs, which you've spelled out in one of the slides that there's been some delays on the programs and some of them are, I think, EV programs. Can you give some color on when do we expect those programs to come on stream? And how should we think about the utilization ramp-up of the new plant?

I can tell you that for the EV powertrain, if you can see that in the [ month ] in the one of the project of EV, that is the volumes are gearing up right now in Q4. And the other location is in Pune, where the EV powertrain one model is launched in the earlier year. And this is -- again, the volumes are still ramping up on to those as suggested by the customer in their RFQs. But we have to watch it carefully and because as the -- they are not going to ramp up as the volume has been suggested in the first place. But slowly, we are seeing that there is an improvement in that.

The next question is from Siddhartha Bera from Nomura.

Sir, first question on the growth side. So in the last few quarters, with the industry growing at 4% to 5%, we have been growing at close to mid-teens. But now with the industry growth picking up meaningfully, and given the copper price, which also sort of benefits your revenues as it is a pass-through, is there anything else which is sort of maybe dragging down the growth to some extent, given the strong industry momentum, if you can sort of talk about something there?

I think this particular thing refers to just a time lag really, the second quarter, third quarter -- in second quarter, we had the Diwali and all these other particular thing and the announcement by the government. But I'll let Anurag answer that question or Pankaj to help it if necessary.

So I would say that there is nothing else which we can think of, but the newer models getting launched, the volumes have come up, of course, with the reduction in VAT. And therefore, we see higher revenues as well. And the entire impact of copper, as my colleagues already explained, has not been factored in the revenue, but it is in the cost.

Understood. Understood. And second question is, sir, on these greenfield plants again, I think if I look at the revenue ramp-up, they are probably reaching maybe close to the 50% utilization levels. And the EBITDA losses also haven't gone down meaningfully. So when should we expect probably an EBITDA breakeven at what utilization level do you think we can achieve the breakeven at the EBITDA level at least?

So as the volumes of the customers are ramping up, I think we have also mentioned in our presentation that in some cases, the ramp-up has been slower than expected. In some cases, it had been deferred. So we believe that in the coming quarters, step by step, it will continue to improve. Already, the performance is improving as the volumes have kicked in. And before the start, we have to put all the costs. So we try to build that up, and they will continue to taper down. And in the next, I think, 2 to 3 quarters, we should see these ramp-ups reaching the right levels or so.

Got it. Sir, last question is on the cost impact, which you highlighted of about close to 200 bps in the quarter. So if you look at the ex greenfield margins, which are at 11.3%, that also will be impacted by this copper. Is it the right assumption?

Yes. Yes, it's the right assumption because copper is all across.

Okay. Okay. So even there as well, we should see improvement as these get passed on to the customers over the period?

Right.

Actually, I don't think anybody in this particular thing can -- in the kind of scenario, you have the rupee devaluation also and you have the price increases also. So definitely, it's -- we've not seen anywhere resistance from the customer. They are very much helpful to make sure that we are maintaining this particular facility. Right, Pankaj?

That's right. So it has always been it's contractual understanding between us and the customers for this...

Got it. Sir, lastly, on the CapEx side, if you can just highlight what is the CapEx plan for this year and next year, if possible?

Go ahead. Go ahead, Gulshan.

So for this year, we projected a CapEx of INR 220 crores. So out of that, INR 150 crores have already been incurred, and we are expected to go as per the plan in the remaining period of this year. For the next year, we are populating the budgets. Our discussions with the customers are ongoing, how the plans would be placed. So basis that, we would be able to finalize that. So probably in the next quarter or so, we would be able to give a clarity on the numbers for that part.

[Operator Instructions] The next question is from Rahul Kumar from Nuvama Wealth Management.

Am I audible?

Yes, sir, please go ahead.

Yes. Raghu here from Nuvama. Congratulations for the strong revenue performance. Sir, my question was on the ramp-up of the greenfields. You have indicated in the presentation also that Gujarat plant is ramping up in Q4, even the Kharkhoda plant ramp-up is continuing. So going forward, over the next 6 to 9 months, do you expect the plants to reach optimal utilization? And once they reach that kind of utilization, would you expect the margins for greenfields to be closer to the blended margins?

Thanks, Rahul.

Raghu here, sir.